Not exactly a coal boom, but the world might be seeing another rebound in coal consumption in 2021 despite two years of diminishing demand. The International Energy Association (IEA) in its latest Energy Mix issue: Coal 2020 has spelled out recent global and regional trends in coal demand, supply and trade, and an outlook to 2025, which reflects the unprecedented times of 2020.
Decline in coal demand in 2019 was due to weak electricity demand growth and low natural gas prices. The IEA Report shows that global coal demand decreased 1.8 percent after two years of growth in 2019 where power generation from coal declined by 3 percent – as electricity from renewables picked up. After an electricity-driven decline in coal demand in 2019, 2020 followed with a pandemic-driven drop. Decline in overall demand for electricity during 2020 was highlighted by lockdowns and weak economic activities - compounded by low natural gas prices. The report predicts that in 2020 global coal demand will experience its largest drop since the Second World War, falling 5 percent from 2019 levels. Note that global coal demand is largely driven by electricity and power demand, which started shifting towards renewables in 2019, a trend that is likely to continue and build in 2021 and beyond.
However, the forecasted recovery in coal consumption in 2021 does not come as a surprise. As the world recovers from the yearlong implications of COVID-19, electricity demand and industrial activity will increase – the two areas where coal consumption dominates. It is also likely that climate-related goals and targets might be held back to bring back economic growth. IEA forecasts a rebound in global coal demand of 2.6 percent, led by China, India, and Southeast Asia; even the decline of coal use in the US and the EU is likely to slow down as they might see their coal consumption increase for the first time in 10 years.
Coal surely holds a position in the near future but only for a little while till the economies come out of the pandemic-hit world and resume their climate and emission targets. Overall, coal demand is expected to plateau beyond 2025 due to three plausible reasons. One, coal-fired power plant retirements in developed countries will accelerate. Two, the renewables will gain foothold, dimming coal’s prospects in power generation. And three, coal is no more the cheapest source of energy; oil prices crashed to their lowest ever during the pandemic and gas prices were also driven low.
The report categorizes Pakistan among countries that will however continue to see a rise in coal consumption. contrary to Bangladesh where coal demand is likely to be rising much slowly, coal demand and consumption in Pakistan. Coal power plants already up and running that include the 1,320 MW Sahiwal plant in Punjab; 1,320 MW Port Qasim plant in Sindh; and 1,320 MW Hubco plant in Balochistan as part of CPEC – all using imported coal. And though the Prime Minister has recently announced a rollback on coal powered generation plants going forward, another 5 GW of coal-fired power plants are planned beyond 2021, mostly operating on domestic lignite as per IEA’s data.
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